Portsmouth will kick off their Championship campaign at Coventry on Saturday after avoiding liquidation and almost certain oblivion today when the high court dismissed Her Majesty's Revenue and Customs' appeal against the company voluntary agreement (CVA), which the club's creditors voted for to take them out of administration in June.

HMRC said it would not appeal against the verdict, allowing Portsmouth the prospect of undertaking long-term rebuilding following nearly two years of turmoil.

Mr Justice Mann offered the following reasons for his ruling: "This case turned on commercial validity and not the football creditors rule. This is not the right place to decide whether creditors rules are fair or not. There is no way in which any worthwhile solvency can flow into the club other than the CVA."

HMRC's appeal to have the CVA dismissed was dependent on its being able to convince the court that the Premier League stipulation stating all football creditors must receive 100% of owed monies is unlawful. If Mann had ruled in HMRC's favour, it would have rendered the CVA inviable, as it would have been agreed without some requisite creditors and owed monies taken into consideration.

The decision not to appeal, with HMRC ordered to pay Portsmouth £200,000 in costs within 14 days, leaves the way clear for Balram Chainrai, the largest creditor, to buy the club.

Ashok Patel, the Hong Kong businessman's lawyer, said: "We are, of course, very pleased with the decision because we are the only purchaser the judge mentioned in his judgment. From the very beginning Mr Chainrai's aim has been to stabilise the club and to make sure Portsmouth continues as a football club. In that regard Mr Chainrai is prepared to work with the administrators and do all things necessary to allow the club to play in this season's Championship and take the club forward.

"The agreement is being worked on and we hope to finalise it in the next few days. Obviously it is a matter for the administrators and for Mr Chainrai's company."

Asked for Chainrai's reaction on hearing Mann's ruling, Patel said: "He was very happy because it opens the way for the only realistic solution, which is for his company to purchase and stabilise the club, and to continue in the Championship. He is in the country and is likely to meet [Andrew] Andronikou [an administrator] and David Lampitt [club CEO]. It is very likely he will attend the match against Coventry on Saturday."

Peter Kubik, one of the co-administrators, said: "Next we get on with trying to sell the club. We have one and one only [potential purchaser]. Now that the issue of this challenge has gone away, there may be some more out there."

Kubik was clear on the consequences for Portsmouth if HMRC's appeal had been successful. "It may not have been the end [but there] was the very real prospect that it could have been," he said.

Discussing the CVA, which offers 20 pence in the pound over five years, Kubik added: "I am sympathetic to all people who won't get paid in full. Unfortunately, that's not my battle to fight."

HMRC said it will now focus on the wider case of the creditors rule, which will be heard in the autumn. A spokesman said: "HMRC is naturally disappointed not to have won this appeal and we can confirm that we do not intend to appeal. Our aim when pursuing debt of any kind is to achieve a fair outcome for the taxpayer and we will take this forward in the wider context of the football industry through separate and outstanding legal proceedings over the status of the football creditors rule.

"This is an important and complex judgment and until we have had the opportunity to study it in detail, we can't comment further."